Background

Let us be honest, in the United States the economy outlook is diming a bit.

Outline

1. Inflation
   • Federal Reserve
     • Jerome Powell
2. Geo-Political
   • Great unwinding
     • Russia
     • China
3. Industries Impacted
   • Semi-Conductor

 

Inflation

Federal Reserve

Jerome Powell, Federal Reserve Bank Chairman

Economic conference in Jackson Hole, Wyoming ( 2022 – August )

Jerome Powell says Fed is resolved to fight inflation even if it brings economic pain

Link

1. 1. In short and direct remarks Friday at an economic conference in Jackson Hole, Wyo., Powell acknowledged that higher borrowing costs will likely cause some short-term pain for families and businesses.
   2. Unemployment may be higher and the economy may grow more slowly. But Powell warned the alternative — allowing high inflation to continue unchecked — would be worse.
   3. “Without price stability, the economy does not work for anyone,” he said.
   4. “We are taking forceful and rapid steps to moderate demand so that it comes into better alignment with supply, and to keep inflation expectations anchored,” Powell said. “We will keep at it until we are confident the job is done.”
   5. The prospect of sustained higher interest rates triggered a sharp selloff in the stock market. The Dow Jones Industrial Average tumbled more than 1000 points or 3% on Friday, following Powell’s remarks. The S&P 500 index fell nearly 3.4%.
   6. “While the lower inflation readings for July are welcome, a single month’s improvement falls far short of what [Fed policymakers] will need to see before we are confident that inflation is moving down,” Powell said.
   7. Powell noted in his remarks that when Volcker took control at the Fed, the U.S. had already endured more than a decade of failed, often halting efforts to control inflation.
   8. By that time, Americans had grown so accustomed to soaring prices, it took a lengthy period of high interest rates — and a severe recession — for Volcker to turn things around.
   9. “History shows that the employment costs of bringing down inflation are likely to increase with delay,” Powell said. “Our aim is to avoid that outcome by acting with resolve now.”

 

Geo-Political

Great Unwinding

The great unwinding between the East and Wind continues apace.

With Russia via the Ukraine War.

And with China via trade wars.

 

Industries Impacted

Semiconductors

2022-September-1st

The Biden Administration imposed license restrictions on sales of AI chips to China and Russia.

The technology companies that will be affected are Nvidia and AMD.

 

Videos

Mohamed El-Erian

1. El-Erian Explains Why America Is Entering A Terrifying Financial Crisis
   • Profile
     • El-Erian explains the 2022 crisis and Fed’s monetary policy, sharing 4 steps to solving these issues.
     • He also elaborates on the frightening economic trends that are going to impact financial conditions in the U.S.
   • Videos
     • Video #1
       Channel:- FREENVESTING
       Date Published:- 2022-August-13th
       Date Added:- 2022-September-4th
       Link

Jeremy Grantham

1. Jeremy Grantham: The Crash That Will Change A Generation
   • Profile
     • Jeremy Grantham shares his thoughts on the current stock market bubble and explains how to not get wiped out in the near future.
   • Videos
     • Video #1
       Channel:- FREENVESTING
       Date Published:- 2022-August-27th
       Date Added:- 2022-September-1st
       Link

Ray Dalio

1. “BE CAREFUL! The Crisis Got Much Worse…” – Ray Dalio’s Last WARNING
   • Profile
     • Ray Dalio has studied the last 500 years of history and economic cycles.
     • He explains the current economic crisis and shares his thoughts on how to protect yourself from what is coming.
     • Share your thoughts in the comments below and enjoy the analysis from one of the world’s greatest investors!
   • Videos
     • Video #1
       Channel:- FREENVESTING
       Date Published:- 2022-August-26th
       Date Added:- 2022-September-1st
       Link

Charlie Munger

1. Charlie Munger Predicts a Horrible Economic Crisis Where EVERYTHING WILL COLLAPSE
   • Profile
     • Charlie Munger warns about the biggest inflationary bubble in world history bursting and shares his thoughts on how it is going to unfold. He elaborates on the difficulty of building wealth for the young generation of today compared to his. Charlie says that we’re flirting with serious trouble and the consequences may be worse than what Paul Volcker was dealing with in the 1970s.
     • Being a vice chairman of Berkshire Hathaway and the closest partner (right hand man) of Warren Buffett, Charles T. Munger has a net worth of around $2 billion. He is a profoundly wise man who is absolutely worth listening to, especially when it comes to investing, the psychology of wealthy people, rationality, and life experience.
   • Videos
     • Video #1
       Channel:- FREENVESTING
       Date Published:- 2022-August-27th
       Date Added:- 2022-September-1st
       Link

Transcripts

Mohamed El-Erian

El-Erian Explains Why America Is Entering A Terrifying Financial Crisis

Inflation

Inflation is Transitory?

1. I look at Inflation hopefully coming down by the end of 2022
2. But, it is the growth of Inflation that will stabilize
3. I do not expect the actual inflation rate to drop
4. I think it will be more entrenched and broad based
5. Collateral Damage
   • I am most worried about the collateral damage that will accompany inflation
   • They started getting it wrong 15 months ago
   • When they absolutely embraced the notion of transitory inflation
   • While it was still an open question
   • Had they listened to companies they would have been a lot more humble

Cognitive

1. I think the Federal Reserves kept saying it was transitory
2. They would have been better served if they had listened to the companies themselves
3. They were still doing Quantitative Easing ( QE ) in March 2022

International Payment System

1. International Payment System
   • We have weaponized the International Payment System
   • We have weaponized it without any kind of standards, safeguards, or anything else
   • If you are a third country looking in, you will start to start evaluating your risks to a dollar based system
   • If you are not careful, we will end up fragmenting the global economy
2. Russia
   • Russia is a G-20 system
   • It is the 11th largest economy in the world
   • Or was the 11th largest economy on the eve of its illegal invasion into Ukraine
   • The notion that you would put sanctions on its central bank
   • The notion that you would take it out of the payment system and not allow it to settle its payments
   • was one that was almost unthinkable
   • That is the nuclear weapons of sanctions
3. Sanctions
   • Types
     • Trade sanctions
     • Sanctions on individuals
   • System
     • There was a system that governed those
     • and, this is something we know
     • but, this was different
     • It is very powerful, if you don’t have carves out
     • You can bring an economy to its knees
   • In Personal terms
     • Imagine if I stop you from using any credit cards, debit cards
     • And, all you have is the cash on hand
     • no matter what you want to do in terms of paying or receiving you will not be able to do it
     • that is how powerful this sanction is
   • Safeguards
     • So we have weaponized a really powerful tool without having any safeguards on how to do so well

 

Summary

Jeremy Grantham

Jeremy Grantham is a good story teller.

This time is never different!

 

Referenced Material

1. NPR
   • Jerome Powell says Fed is resolved to fight inflation even if it brings economic pain
     Authored:- Scott Horsley
     Date Published:- 2022-August-26th
     Link
2.  Yahoo
   • Yahoo Finances
     • Nvidia stock hits new 52-week low amid U.S. export ban news
       Authored:- Ines Ferré
       Date Published:- 2022-September-1st
       Link
     • Nvidia stock drops after U.S. restricts chip sales to China
       Authored:- Akiko Fujita & Brian Cheung
       Date Published:- 2022-September-1st
       Link
     • Chip wreck: Nvidia sinks sector after U.S. restricts China sales
       Authored:- Noel Randewich
       Date Published:- 2022-September-1st
       Link